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Karnataka govt to raise Rs 50 crore as biotech fund

Livemint:  October, 2015

New Delhi:: Five years after it announced a biotech policy, the Karnataka government is planning to raise a Rs50 crore dedicated fund for the sector. As part of a start-up policy which is on the anvil, the state government is also planning to start a Rs100 crore start-up fund.

The two proposed funds along with already operational Semiconductor Fund of Rs100 crore sums up the government’s efforts to engage with the emerging technology and biotech space in the state.

The Karnataka Information Technology Venture Capital Fund (KITVEN) is in the process of getting an approval from capital markets regulator Securities and Exchange Board of India (Sebi) for the bio-tech fund, said an official in Karnataka Asset Management Co. Pvt. Ltd, according to A.R. Jayakumar, chief executive, Karnataka Asset Management Co. Pvt. Ltd, a state and central government financial institutional backed Venture Capital fund that invests in early stage companies in rounds after seed funding.

The state government’s share in three funds will be at least 25% while the remaining capital will be raised from institutional investors, including Karnataka State Industrial and Infrastructure Development Corp. Ltd (KSIIDC), Karnataka State Financial Corp. (KSFC) and Small Industries Development Bank of India (SIDBI).

Though the state has announced dedicated policies for sectors such as aviation, animation, visual effect and gaming, information and technology, it has very little to show anything beyond a policy.

Issues such as delays in file clearances, land allotment, high cost of power and rental and lack of basic infrastructure has resulted in big investors either shelving their projects in the state or moving to neighbouring Andhra Pradesh, Telangana and Maharashtra.

Congress vice-president Rahul Gandhi, who was in Bengaluru last week, reached out to the start-up community to take their suggestions and asked chief minister Siddaramaiah and state ministers to bring out a comprehensive policy.

“The new start-up policy will bring down the cost of power from commercial to industrial rates as well. The difference is around Rs1.6 per unit,” a senior government official involved in the drafting of the start-up policy who did not wish to be named.

A.R. Jayakumar, chief executive of Karnataka Asset Management Company, said the company has been investing in IT services companies since 1999-2000. He said that so far they have invested around Rs.60 crore in over 30 IT services companies and exited from 17.

He said the firm invests in companies that already have been paying customers and clients in the range of Rs.50 lakh to Rs.2.5 crore. The state is also set to receive around Rs.25 crore from the Rs.500-crore Centre-Electronic System Design and Manufacturing (ESDM) fund.

“Earlier we did not have the ecosystem to disburse these funds,” said Kiran Mazumdar Shaw, chairperson and managing director of Biocon Ltd. She said that now there is a strong presence of bio-tech companies but at the time of the policy announcement there were “no takers” for the fund and no proper platform.